Wydanie Specjalne

2017 was very good for the Polish economy in a number of fields. In the second half of the year, the economic growth picked up and the GDP rate for the year as a whole was 4.6%. What was the driving force behind the economic growth was the consumer demand stimulated by the “500+” programme and rising wages. The positive economic results were also influenced by the economic situation in Europe. Exports increased – in 2017 its value was more than 10% higher than a year before. Germany is the main trading partner of Polish companies. The share of the country in the total Polish exports exceeded 27% in 2017. Other countries where Poland exports a substantial number of domestic goods are the Czech Republic, Great Britain, France, Italy, and the Netherlands. All in all about three quarters of Polish exports are sent to EU member states.

The financial condition of the sector of enterprises is good. After the first three quarters of 2017, the average net return on sales was 4.6%; all economic activities were viable but the profitability level was diversified, e.g. a return on sales of 1.4% – 1.6% was recorded in retail trade and infrastructure construction, and the highest return on sales (of 9% – 12%) was observed in electricity and pharmaceutical production.

What also needs to be noticed is the negative tendencies seen in the economy in 2017, including the weak investment market, labour shortage more and more often signalled by enterprises, and rising inflation.

A problem crucial to the economy is how to revive investment. In 2016 investment dropped by 11.8%, and the fall was observed both in corporate investment and in investment made by the government and local-government sector. Although the 2017 economic growth was relatively high, companies are still unwilling to invest. No complete yearly data on investments in the economy as a whole are available yet, but it is known that the level of investment made in the sector of enterprises in the first three quarters of the year stagnated or slightly dropped. Firms do not trust in the stability of the legal system and predictability of government decisions.

Dark clouds have gathered over the labour market; Polish companies started to experience a lack of employees, which may become an obstacle in their business development. Despite the signals from companies about their difficulties with finding workers, in 2017 average employment in the sector of enterprises was 4.5% higher than a year before, and unemployment fell to 6.6%, which was the lowest level for 26 years. In 2017 the average nominal wage and the real wage went up by 5.9% and 3.8%, respectively, in the sector of enterprises. Rising inflation: in December 2017 the inflation rate was 2.1%. What influenced the inflation level most was food and fuel prices.

Good results in construction in 2017

After a drastic slump in construction in 2016, 2017 saw a positive change in the market situation. Encompassing investment and renovation works, the construction and assembly output produced in the territory of the country by construction companies employing >9 people increased by 12.1% in 2017. The output was recorded to be higher than in 2016 in all construction business lines.

2017 brought a stop to the falling construction output, clearly a negative tendency, yet the good result partly derived from a “statistical effect” as well, as it was calculated in reference to the very low figures recorded in the preceding year. Should one compare the construction output produced in the last few years by companies employing more than 9 people, then it becomes clear that the levels recorded in 2014-2015 were not yet reached in 2017.

It is worth noticing that there are also small businesses operating on the construction market (companies employing fewer than 9 people, and micro-companies). These firms flexibly adjust to market changes and their market share has recently increased. In 2016, when the construction industry was in the most disastrous slump, the small entities were quicker to recover than the bigger players. However, these are large enterprises that shape the nature and structure of the market, and undertake prestigious projects.

Recently the growth rate in construction was most influenced by the construction of motorways and dual carriageways, and residential construction.

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Motorways and dual carriageways

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The programme of building a network of motorways and express roads in Poland developed in the late 1990s has been implemented on an ongoing basis with a lot of modifications. The changes made in the original version of the programme referred to the deadlines for completing individual sections of roads and the road classes. The development of the motorway and express road network is a priority task mainly due to its significance to the modernization and restructuring of infrastructure and the use of EU funds. According to the programme of 2016 in the end dual carriageways are to be 7,650 km long, including 2,000 km of motorways and 5,650 km of express roads.

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By 12 January 2018, 1,660 km of motorways had been completed, which was 88% of the target. If onelane sections, sections for which an environmental permit has been issued (environmental permits define the conditions of approval of an undertaking), and motorways under construction and under tender procedures are taken into account, then the target length will be soon exceeded.

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The construction of express roads is much slower. By 12 January 2018, 1,834 km out of the target 5,650 km of express roads had been completed, and having included in the calculation the length of onelane sections and sections with environmental permits, the total slightly exceeds 50% of the target. At present there are 1,687 km of express roads under construction or under tender procedure.

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Residential construction is definitely gaining momentum

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178.3 thousand flats were completed in 2017, which was 9% more than a year before. It must be highlighted that the 2017 residential construction output exceeded the record-high result from 2008, which was 165.2 thousand RU (the best-ever result till then). The rise was recorded both in private housing (of 5.9%) and in housing for sale or rent erected by property developers (of 13.5%). The number of flats for which planning permits were issued or which were declared in accordance with the building project went up as well; in 2017, 206 thousand flats started to be constructed (18% more than in the previous year) and 250 thousand planning permits for dwellings were issued. The fact that more and more flats are started to be erected is a herald of maintaining the upward tendency in residential construction; what is also expected is the implementation of the “flat+” programme addressed mainly to low- income households. Soon, the first flats are to be completed under the programme. “Flat+” meets the society’s expectations, especially considering the cost and location conditions that are to be observed and the basic living standard that needs to be guaranteed.

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Among other factors that outline the situation in the construction industry there are construction activity and economic indicators. After a few years of curbed construction activity, the year 2017 brought more decisions made in relation to initiating various undertakings than the year before. The economic indicators for the construction industry show high volatility; yet in 2017 fewer firms signalled that the economic situation in construction had deteriorated than in 2016, and more companies indicated that the market conditions had improved. Due to the seasonal nature of construction, the first quarter of each year always presents low figures.

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Basic indicators in construction

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Positive changes in industry

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The industrial marketed production rose by 6.5% in 2017, and all sectors of industrial processing recorded good or very good results, with an overall yearly rate of 7.3%. High figures were also observed among others in the case of manufacturers of machines and tools, metals and metal products, plastic, mineral materials for construction and glass industry. For years the glass industry has been among fields with the highest increase in production. Both in 2016 and in 2017 the glass industry output dynamically rose. When assessing the tendencies of changes in the glass industry, one should pay attention Glass and Economy to the fact that the rise in the glass and glassware marketed production was higher than the rise recorded in the processing industry, and also higher than the increase in construction mineral materials. In 2015-2017 the value of marketed production of glass and glassware, the number of basic assortments, production economic viability and industry exports systematically rose.

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The share of the value of glass and glassware in the mineral material industry has systematically increased. The same can be said about the manufactured quantity of the most important glassware. Indeed, goods of various materials appear on the market (e.g. those made of plastic) that have the potential to substitute glass in a number of applications, yet glass continues to be the material most appreciated by users: especially preferred products are the modern ones made of flat glass. The output of cast and rolled glass dropped; on the other hand, the production of float glass, single- and multiple-glazed units, and multilayer safety glass with dimensions and shape adjusted to building in rose. Also, household glassware production was higher than in 2016.

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The state of advancement in construction as at 12 January 2018 - data from Wikipedia

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The glass industry is among fields with a high rate of return

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The rate of return in the glass industry has been high for many years, higher than the average rate of return recorded in the processing industry. Main factors influencing the rate of return generated by companies producing glass and glassware are the volume and cost-effectiveness of exports. What is also important is the price on the domestic market and the falling production costs resulting from modernizing the machine park and installing modern devices.

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Structural changes ensuring an increase in production and in its effectiveness are triggered off by a high share of exports in the glass industry marketed production. It must be clearly noted that the market position of glass industry is good; its financial condition is stable, and the stability of export relations protects the industry against fluctuations in the domestic demand.

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Industrial production in total and in the glass industry

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Exports

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The total Polish exports amounted to 203.7 billion euros in 2017, and thus were 10.2% higher than in 2016. The biggest recipient of Polish exports was the European Union. Countries in the Central and Eastern Europe contributed to an increase in Polish exports, but their share was small compared with the EU.

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Polish companies are recognised and highly rated exporters of glassware in European markets. Exports is a factor contributing to the development of the glass industry and it speeds up the rate of increase in production. According to the initial evaluation, in 2017 the exports of glass industry products were worth EUR 1,750 million, which was nearly 6% more than in the previous year. The exported goods were diverse, and a higher export growth was recorded in the case of various types of household glassware than flat glass. The average prices on European markets have varied; between 2014-2017 the prices of household glassware were usually subject to slight fluctuations, but the prices of modern flat glassware went up.

Good or even very good results were achieved in a number of industries in 2017: GDP accelerated, unemployment was low, exports were on the increase and industry and construction had begun to revive. The situation was stimulated by the good condition of the European economy. Yet, there are not only good news about the economy but also some bad ones. Sustainable economic growth should be based on investment, and the current high GDP growth rate derives from the domestic consumption demand, not from investment. The share of GFCF in GDP is 18%, and it is now at the lowest for many years. Although the economic growth has accelerated, reaching 4.6%, companies are unwilling to invest. The reason for the situation should be seen in the uncertainty of the business environment and changeability of the law.

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In EU member states recording a high volume of GDP for years (e.g. Germany, France, the Netherlands, Luxembourg) the growth rates were about 3% in 2017. On the other hand, the countries of “our region” attained economic growth rates similar to or higher than Poland (e.g. Romania 7%, Latvia 4.8%, the Czech Republic 5%, Slovenia 4.9%, Poland 4.6%). It is easier to have a high growth rate if the GDP reference level is relatively low.

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Companies have been experiencing a shortage of staff, which may hinder the development of their business. Labour emigration (especially the emigration of experts) exacerbates the problem of a shortfall in labour force. Despite an advantageous economic situation and a wide range of vacancies on the labour market, Polish labour emigrants do not only refuse to come back, but, what makes things even worse, highly-qualified young people decide to go abroad to work. Entrepreneurs want to provide more favourable conditions to the employees by increasing salaries, but according to the latest data, some of the pay is already “eaten” by inflation.

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In the nearest future we may witness multi- -directional changes triggered off by both positive and negative effects of the present economic policy. Economic growth will depend on the political situation, pro-investment measures taken by companies, faster accomplishment of investments co-financed with EU funds and effectiveness of steps taken to attract foreign investors to the Polish investment market.

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An important factor contributing to structural changes and ensuring the expansion of production is a high share of exports in the marketed production. The glass industry is characterised by favourable economic factors, its market position is firm, and the strength of export relations can be perceived as a guarantee against fluctuation on the domestic market.